Disturbing Court Case Where Daughter Financially Assisted Mother

This edition of the Koldin Report E-Newsletter reviews a disturbing Court case where a daughter financially assisted her mother.

The legal relationship between parent and child is ever changing. A hug, a kiss and a thank you will not hold up in Court anymore.

In a recent case, a daughter advanced over $144,000 of her own funds to help pay for her mother’s nursing home care. The daughter documented the payments which are not in dispute. The mother, from her own funds, reimbursed the daughter the $144,000 at a later date.

In this case, why didn’t the daughter use her mother’s funds in the first place instead of advancing her own? Although the Court does not review the reasons, there could be many including:

1) non liquid assets – awaiting the sale of the family home

2) long term high yield investments

3) CD’s that have not yet matured

4) large penalties for early withdrawal, ex: annuity

The mother and daughter did not have a written agreement outlining the legal relationship of the parties. Was the daughter’s payment intended to be a gift or a loan? Did the mother have a legal obligation to repay it?

The mother applied for Medicaid and was denied because the $144,000 repayment to her daughter was treated by Medicaid as being a gift from the mother to the daughter. This gift was considered to be an improper transfer of assets and subject to a transfer penalty period of ineligibility. Medicaid took the position that the mother did not owe the money to the daughter and that the mother’s $144,000 should have been used to pay the nursing home.

On appeal, the Court affirmed the denial by Medicaid and held that since the mother and daughter did not enter into a written loan agreement at the time the daughter financially helped her mother, the daughter is presumed to have intended to make gifts without expectation of repayment.

In this case the daughter will lose her $144,000. In hindsight she should have entered into a written agreement with her mother at the time the loans were being made. If the written agreement had been designed properly and signed at the time the money was being advanced, the daughter could have been legally reimbursed the $144,000. This decision requires that parent and child have a contemporaneous written agreement between them.

Medicaid can become a financial nightmare if you act on your own without experienced legal assistance.